Regulations on investments
The LPP contains regulations with which pension funds must comply for their investments. They must be cautious in their investment decisions and spread available capital among various investment categories. They must strive for a return corresponding to that in the monetary, financial and real estate markets.
Investments must also be made for the short, the medium and the long term, so that benefits and vested benefits can be paid when required.
The institutions that implement occupational pension schemes pursuant to the terms of the LPP must be registered. They are subject to joint management, i.e. the managing body must include as many representatives of employees as of employers, having the same rights. The insured elect their representatives directly or by proxy (delegates).
The obligation to inform is particularly important. The pension fund must each year inform its members of their rights relative to benefits, on the coordinated salary, contribution rates, their old age assets, on organisation and financing, as well as of the members of the joint management body. Insured persons may request to see the annual accounts and the annual report. Moreover, the institution must inform the insured who request it of return on capital, the evolution of actuarial risk, administrative costs, the principles according to which the cover capital is calculated, additional provisions, and the degree of coverage, pursuant to Article 86b LPP.
A recognised auditing body controls the management, the accounts and investments of the pension funds each year. Periodic controls are also undertaken by a pension scheme expert. Cantonal surveillance authorities check that pension funds comply with legal provisions and regulations. The supreme surveillance body is the occupational pension funds supervisory committee.
There are two special institutions to second the ordinary ones: the guarantee fund and the auxiliary fund.
The suppletive institution ("institution supplétive") insures employees whose employer is not affiliated with any officially registered pension scheme. It also insures those who wish to do so on an optional basis - the self-employed, for example - as well as those who are no longer affiliated with any other pension fund. Finally, it insures the recipients of unemployment compensation against the risk of death or disability. It is financed by all concerned parties, which is why it is also called a "collective fund".
The guarantee fund ("fonds de garantie") which operates throughout Switzerland, is financed by the contributions of all pension funds. It subsidises institutions with an unfavourable age structure. This is the case when old age bonuses amount to more than 14 % of the sum of coordinated salaries.
The fund also guarantees statutory benefits owed by insolvent pension funds. However, the guarantee in the event of insolvency only covers benefits that are not more than one and a half times the upper limit of the insured salary; in other words, benefits are paid only to the amount of CHF 129'060 until 2022 and CHF 132'300 from 2023.
Funds providing "over-obligatory" benefits
There are funds that provide benefits going beyond the statutory benefits defined by the LPP. In this case we speak of "over-obligatory" schemes, or pillar 2b.
The funds that offer only such schemes are not subject to the LPP. They are usually chosen by people who already have minimum statutory insurance in another pension fund.